The Mortgage Industry Fights for Its Right to Party
I went to a lovely party this weekend. And there were so many smart people there. Two who I was talking with-- both health care experts-- were absolutely positive than no matter who was elected president, there was absolutely no chance that there would be any transformational change in the way the people of this country receive health care. Gee, I thought that was part of the reason we were electing Democrats in a big way this year. But what do I know?
Today's NY Times has a story in the Business Section that probably belongs on page one. It explains why some things get done and why some things don't. It's only trying to talk about the mortgage industry. But the health care industry is much, much worse. Stephen Labaton, who has decided-- or was assigned-- to tackle the issue begins by mentioning that the mortgage industry is fighting back-- intensively-- against threats of regulation. Societies regulate industry when industry's greed gets out of control and threatens the well being of society. Despite Republicans, meat packing plants had to be regulated because... well, people were dying. The "free market" wasn't quite righting the wrongs fast enough. How many more families need to lose their homes before people start dragging mortgage bank executives out and hanging them from lamp posts? Do you think a jury would find anyone guilty? Not around here.
As the Federal Reserve completes work on rules to root out abuses by lenders, its plan has run into a buzz saw of criticism from bankers, mortgage brokers and other parts of the housing industry. One common industry criticism is that at a time of tight credit, tighter rules could make many mortgages more expensive by creating more paperwork and potentially exposing lenders to more lawsuits.
To the chagrin of consumer groups that have complained that the proposed rules are not strong enough, the industryÃ¢â‚¬â„¢s criticism has already prompted the Fed to consider narrowing the scope of the plan so it applies to fewer loans.
The debate over new mortgage standards comes in response to a severe crisis in the housing and financial markets that many economists trace back to overly loose credit and abusive loans. Those practices, combined with low interest rates, led to inflated market values that have declined rapidly in recent months as investors have begun to lose confidence in the financial instruments tied to those loans.